In retail or convenience stores, it is helpful to ensure that inventory is properly stocked at all times in order to ensure smooth and profitable running of business. For example, in the case of perishable items, such as food products, the inventory has to be stocked such that demand is met while simultaneously ensuring that the stock is consumed or sold before expiration of usage duration of a product. A probability of selling out of a stock of a product may be known as the stock-out risk of the product. Further, a probability of wastage of a product due to expiration of corresponding usage duration before a sale, may be known as the disposal risk of the product.
The stock-out of a product results in a loss of opportunity of more sales since customer demand could not be met by a retail outlet such as, for example, a convenience store. On the other hand, the disposal of a product results in economic loss to the retail outlet due to wastage. Therefore, staying ahead and optimizing profit in today's cut-throat competitive environment, planning and management of the inventory and automatically reordering an appropriate amount of inventory is a challenging but necessary task.
Conventional approaches use fulfillment or replenishment schemes that are prepared for different products based on factors, such as usage duration, shelf space, supply, and demand of a product. If the usage duration for a product is fairly lengthy and the corresponding sale size for the product is large, the stock-out risk for the product is low. Therefore, a replenishment scheme for the product can be formulated that focuses on the stock-out risk. On the other hand, if the usage duration is short or the sale size is small, the replenishment scheme can be formulated to focus on the disposal risk.
For instance, in the case of fresh food products, an attempt to minimize the stock-out risk may result in a drastic increase in the disposal risk. Furthermore, products sold in bookstores and pharmacies generally have long usage duration but a small sales size. In such cases the disposal risk may be significantly high, as a sufficient amount of stock cannot be kept due to limited storage space.
Conventional techniques determine a number of products required for a future time based on past sales considering stock-out risk only. Such techniques do not consider the disposal risk as a factor for replenishment of the products. Further, the entire process is time-intensive and follows a fragmented approach. Therefore, the conventional techniques offer a fragmented approach for replenishment of the products and are time-intensive and complex. There is therefore a need for techniques that forecast the amount of inventory to be ordered based on both the stock-out risk and the disposal risk of a product and then automatically order such inventory.